Finance Committee on Nov. 25th, 2013

[Mark Adler, Conservative, York Centre, ON]

It may take them out of the not-for-profit scheme. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

Mr. Côté, you have the floor for five minutes.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Mr. Bolduc, I came to realize the importance of your investment fund when I learned that it included approximately 10,000 investors in the riding of Beauport—Limoilou alone. These investors are people who are putting money aside for their future, their retirement. I can assure you that when it was publicly announced that the tax credit would be eliminated, people reacted very quickly. I was paid some visits at my office and the things people said to me cannot be repeated in committee. Obviously, when someone's assets are affected, we can expect them to react strongly.

I would like to discuss another topic, that being your impact on SMEs and employment. You mentioned Deloitte's study. What I find fascinating is your countercyclical role in a recession. You help keep companies afloat and preserve jobs. I think that is probably one of the most positive aspects, especially given the comments made by the former secretary of the Treasury of the United States, Lawrence Summers, a few days ago. Among other things, he acknowledged the failure of austerity measures.

[Yvon Bolduc]

I can give you as an example the credit crisis that we went through in 2008-2009. I think that everyone around the table remembers that tragic and very serious period that was extremely important. While banks and other private funds withdrew from the markets, our fund committed $1.3 billion. How did we manage to do it? Our size, for one, and our mission, which is to invest in a countercyclical fashion. It also consists in supporting companies other funds would not. We take somewhat greater risks, but there is the tax credit to offset that. This is what balances the system.

The tax credit is an incentive to save, but it also helps the individual investor understand and accept the risks we take. That is the raison d'être of the tax credit, and that is what allowed us to invest $1.3 billion when no one else would. This allowed Quebec flagship companies, who benefited from our support, to go knocking on the doors of other financial institutions. Indeed, our capital is patient, unsecured and independent of the banks' capital. It completes the financial ecosystem in Quebec. That's why it is important and why 200 entrepreneurs stood up in the chamber of commerce to ask why such a measure had been taken.

It's important to understand that in Quebec the everyday person sees the importance of our contribution. I am in favour of jobs, innovation, business start-ups, retirement savings and financial literacy. In my opening remarks I mentioned that 200,000 Quebec taxpayers had invested money in an RRSP for the first time thanks to the fund. That is a huge number.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

That is indeed a considerable amount.

In your opinion, will the government's proposed venture capital action plan completely make up for the venture capital you will lose as a result of eliminating the tax credit in Canada? As you said, you are not limited to the province of Quebec, we are talking about all of Canada.

[The Chair, Conservative, James Rajotte]

You have 30 second left.

[Yvon Bolduc]

We would like to work hand in hand with the Canada economic action plan. We propose investing heavily outside of Quebec, with the government of Quebec's permission. We believe it is a winning solution for all three parties. Both industry and government come out ahead, because there is a reduced tax credit; everyone contributes to make it a success. We also win because we can continue doing our work, which is to encourage savings and investments in Quebec, of course, but also outside of Canada, and at a lower cost.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Côté.

We'll go to Mr. Keddy, please.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses.

I want to pick up a bit more from Mr. Bolduc on the labour-sponsored venture capital tax credit. You're tossing out some large numbers there, on investment that's been made, especially at an important time in a downturn in the economy.

I guess the question has to be asked, what's the return to labour on that? Is it more than simply going after the tax credit, or is this an investment?

[Yvon Bolduc]

Let's take the last five years, which have not been easy years. I think everybody would agree with that. Our overall profits were over $2 billion. The increase in the share value has been $6.20—a 28% increase in the value of the shares. We've been able to increase the number of net shareholders because people who are retiring are leaving the Fonds and new shareholders are coming. Over the last five years, we've increased the number of shareholders by 45,000.

That tells me we must be doing something right, and we must be doing our mission properly; otherwise, we would not have this kind of undertaking by the workers in Quebec. Of the shareholders, half are unionized and about 46% are not unionized. It's not a question of labour. It's become a fund recognized in Quebec as doing its job.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I appreciate that, but I guess my question was, if you looked at the same investment and a return on that investment, what's the rate of return?

[Yvon Bolduc]

Overall, in the last three years, we've provided a return of 5.5% to our shareholders.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

That's the number I was looking for, thank you.

[Yvon Bolduc]

That’s 5.5% to our shareholders, without the tax credit. If you compare this performance with our mission, which is to invest principally in Quebec in SMEs with unsecured capital, that's a good return.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

One quick question because I do have others, but it's 5.5% annually?

[Yvon Bolduc]

Annually, that’s correct.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you.

To the chartered professional accountants, I want to pick up on the same line of questioning that Mr. Spiro answered. It's a great challenge for any government to make sure that taxpayers are confident in the tax system and that the tax system has a huge degree of integrity, quite frankly. One thing we've been doing to improve that public confidence is to try to track down Canadians who are investing their money abroad, oftentimes hiding that money abroad. I think we've done that.

Bill C-4 extends, in certain circumstances, the reassessment period for taxpayers who have failed to correctly report a specified foreign property on their annual income tax return. We heard from Mr. Spiro on that.

I'd like to hear from the Chartered Professional Accountants of Canada, on reporting specified foreign property and how those changes should affect that reporting.

[Gabriel Hayos]

In general terms, we're supportive of the changes and the new form that's come out. The form T1135 implements that. The three-year time period is important, to give the government more time to track down the people who are not complying. I think our only concern with the rules is, like a lot of these, that they have to be careful. The form creates quite an onerous reporting obligation on those who want to comply. There aren't sufficient exceptions for what is called “specified foreign property” actually located in Canada and under the control of the Canadian brokerage or banking industry.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I think we can all appreciate—

[Gabriel Hayos]

I think our only concern here is to make sure they are dealing with the people who are the problem and not with the ones who are trying to comply.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I appreciate that, and we all appreciate the importance of keeping the forms reasonable.

Do you have any idea on the numbers? We've heard all different numbers put forward here. Any idea on the number of Canadians who are actually not complying, or who are attempting to comply?

[Gabriel Hayos]

No, I don't have any statistical information on that.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Keddy.

We'll go to Mr. Rankin.